The development of the heart is essential for embryogenesis and precedes development of other organs. However, the mechanisms involved in embryonic cardiac development are ill-defined. Recent evidence suggests that Smad and Wnt signaling pathways are important in stem cell fate determination and their commitment to cardiovascular differentiation. We have previously reported that bone morphogenetic proteins (BMP)-2, -5, and -7 and fibroblast growth factors (FGF)-2 and -4 secreted from the adjoining endodermal cells favor cardiac differentiation in murine embryonic stem (ES) cells. Here, we demonstrate that BMP-2, -5, and -7 stimulate receptor-activated Smad1, 5, and 8, which in turn causes oligomerization of Smad4 in the nucleus. We further delineate the role of Wnt signaling pathway as evidenced by induction of Wnt3 and Wnt8b, stimulation of FRP-1, inhibition of GSK-B, accumulation of cytosolic beta-catenin, and transcription of target genes, including c-myc and cyclin-D1. We also ascertained the specificity of BMP- and Wnt-evoked activation of signaling cascades. Our data are consistent with the hypothesis that BMP-dependent activation of transcription factors including GATA-4, Nkx2.5, and MEF-2C augments cardiac differentiation mediated by cooperative control of Smad and Wnt signaling pathways. Our results provide a solid foundation for further study of the biochemistry of cardiac differentiation from stem cells.